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2023 Ⓒ Boston Intellectual Property Law Association

Why Should I Do an FTO? – Benefits of a Diligent Freedom-To-Operate Search and Best Practices

By Steven J. Miller, Lydia Bakalova and Bruce Rubinger, Global Prior Art, Inc.
Running a successful company is a battle that must be won. A company’s survival depends on sound, informed decision making by its leaders. Competition is–or soon will be–all around you. Conceiving, designing, and building a commercially successful product is never easy. Product development is resource intensive, both in terms of time and money. Launching a new product in any industry is a gamble. There are innumerable factors beyond a company’s control that will determine whether a product is economically successful. Consequently, it is beneficial to identify what market factors are controllable and then act accordingly. Of prime concern is whether your product can be made and sold in the target markets without infringing on one or more claims of a competitor’s patent. At a minimum, this requires conducting a search of issued, in-force patents to clear the product and establish freedom to operate; i.e., a product clearance or “FTO” search.
“The art of war is of vital importance to the State. It is a matter of life and death, a road either to safety or to ruin. Hence it is a subject of inquiry which can on no account be neglected.”
Sun Tzu, The Art of War
Around seven thousand years ago, a Chinese master thinker wrote what is arguably the world’s most timeless text on strategic warfare–Sun Tzu’s “The Art of War.” Although conceiving, engineering, and launching a successful product does not involve actual bloodshed (hopefully!), insights from this ancient text are useful when thinking about the value of a well-executed FTO search in the product development process. Attending to what an FTO might uncover is important to avoid a path which may significantly compromise your position.
“The wise warrior avoids the battle”
Sun Tzu, The Art of War
Patent infringement is a complicated, stressful, and immensely expensive battle to be avoided. The cost of defending an infringement lawsuit in federal court begins at around $750k for cases that settle very early; i.e., through the claim construction hearing, to between $2.5 and $5 million for cases the go to trial. A diligent FTO search before your new product enters the market empowers you to act accordingly. Identification of problematic patents informs decisions prior to market entry, perhaps to avoid an infringement lawsuit.
You cannot prepare for the unknown. Proactive identification of issued patents having claims that potentially read on your device is essential for strategic planning before market launch. Identification of problematic claims.
“Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win.”
Sun Tzu, The Art of War
Are you already “defeated” when problem patents exist but are not identified? If your market launch leads to a downstream finding of infringement, commissioning a pre-market FTO search provides substantial protection against an award of enhanced damages–treble actual damages plus the patent holder’s attorneys’ fees. Whether a plaintiff who prevails in a patent infringement action is entitled to enhanced damages is a question of law determined by the judge. Before the judge can decide whether to award enhanced damages to the patent holder, however, a jury must determine whether the infringement was “willful,” a finding of fact. The U.S. Supreme Court recently determined that “A patent infringer’s subjective willfulness, whether intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless.”1 But “Proving willfulness requires a showing that an infringer has engaged in conduct that is ‘willful, wanton, malicious, bad-faith, deliberate, consciously wrong, flagrant, or … characteristic of a pirate.”2 “Behavior characteristic of a pirate” is, arguably, a high bar. Seeking to identify in-force claims that may read on your product followed by reasonable decisions based on the advice of counsel is not “willful, wanton, malicious, bad-faith, deliberate” or “consciously wrong.” Absent a jury finding of willful infringement, the enhanced damages determination never makes it to the judge.
Five thousand years after Sun Tzu, Confucious reportedly said “Look not at what is contrary to propriety; listen not to what is contrary to propriety; speak not what is contrary to propriety; make not movement which is contrary to propriety.” See no evil, hear no evil, speak no evil, commit no infringement–is neglecting to perform a diligent freedom to operate search “contrary to propriety?” Judges and juries might say “yes.” Commissioning an FTO search is an affirmative act to avoid a jury finding of willful infringement, which is a prerequisite to an award of enhanced damages by a judge.
“Ponder and deliberate before you make a move”
Sun Tzu, The Art of War
The Value of Competitive Intelligence
The value of competitive intelligence should not be underestimated. There are additional reasons to conduct a diligent FTO search and many benefits to be realized. These advantages, although less obvious than avoiding an infringement lawsuit with its risk of an enhanced damages award, can be extremely beneficial with developing a new product. They also come collateral to the FTO search without requirement additional time or cost to realize. They include informing an initial decision whether to proceed with development, understanding the competitive landscape, understanding strategic intellectual property “white-space” availability, informing decisions on early design changes, and–of course–clearing the final market-ready product immediately before launch.
First, risk management is of early prime importance. Immediately upon conception of a new product, resource-consuming activities begin. What could possibly go wrong? A great deal. If the initial design is not informed by the existing patent landscape, you may be left downline with manufactured product which cannot be sold. A costly late-cycle redesign may be needed to eliminate or mitigate against infringement risk of a key patent discovered late. Knowing the patent landscape through an expertly executed diligent FTO search of the core high-level product features early in the product development cycle greatly reduces these risks by identifying broad claims issued early within the relevant art space which may read on key elements of the technology as a whole. Such a finding might lead to scrapping further development altogether, or at least initiating major design changes upfront. The results of a diligent FTO search are invaluable here. If blocking art is discovered early, appropriate action can be taken before substantial time and money are spent. Moreover, if no relevant claims are discovered, an expert FTO search wherein the search scope is appropriately broad, equivalent terms and design configurations pertaining to key features are known and recognized though the expertise of the searchers, and confidence is high that the absence of blocking claims in the search results is not because relevant art was missed, then development may proceed with minimal or at least acceptable risk.
Second, knowledge of competitors’ activities is gained as a collateral benefit of an FTO search. What relevant IP, broadly speaking, exists within the jurisdictions wherein you will market or manufacture your product? Are your existing manufacturing vendors operating behind your back? This phenomenon is more common than many appreciate, particularly when manufacturing happens overseas. Key subclasses wherein any patent publication on the new product would be classified are readily identified by an expert searcher familiar with the classification scheme germane to the target art. Through manually searching these key subclasses, the searcher observes essentially all of the patents owned by companies and institutions active in the space. Key assignees become clear through noting the teachings within relevant publications, number of filings within recent years, and the like. Unexpected surprises often arise from these data, such as the existence of small, early-stage companies or research groups you might not otherwise be aware of but for the expert FTO search. Other surprises include uncovering patents by a vendor or product supplier filing patents on your invention, or recent patents filed by a new overseas entrant targeting your market. This critical but often overlooked information can be collected and recorded easily during an FTO search, in parallel with identification of potentially blocking claims.
Third, what are your competitors really up to? Delving deeper, it is also important for the FTO searcher to identify potentially relevant publications in “open” patent families. A problematic application is one still under examination or in an open family having teachings from which your competitor can intentionally draft blocking claims to read directly on your device. This is readily done by filing a continuation application. For example, non-expired PCT applications and initial nonprovisional applications are often lengthy and extensive–explicitly disclosing subject matter from which literally hundreds of claims can be written. The emergence of future blocking claims arising from within an “open” simple patent family (in a relevant jurisdiction) are an omnipresent danger. Savy companies, particularly within the medical device and biotechnology spaces, strategically keep patent families open for many years to retain this opportunity. This subtlety may go unrecognized by inexperienced searchers or those not familiar with how publications are classified within the specific technology space.
“In the midst of chaos, there is also opportunity”
Sun Tzu, The Art of War
Sifting through a chaos of prior art and classification schemes–what exactly makes an FTO search “diligent?” At its core, a diligent FTO search must include (1) a search of issued patents and non-expired published applications by manual examination of IPC/CPC subclasses wherein the target product will be classified; (2) examination of higher-level classes wherein equivalent art may be found with the precise use of only a few broadly limiting keywords; and (3) an assignee search of known competitors and “surprise” potential competitors identified during class searching. A missed blocking claim can delay product launch, trigger a costly redesign later in project development, or result in patent infringement litigation costing millions to defend. Consequently, it is critical for the FTO search to identity all problem patents and publications.
Common mistakes must be avoided through planning and executing a proper diligent search. Such mistakes–and how to avoid them– include “hit and miss” piecemeal keyword searching. Carefully select inclusion/exclusion criteria to focus on the key product elements. Identify the relevant subclasses for manual searching. The search must be comprehensive–consider equivalent technologies wherein broad claims could be infringed under the Doctrine of Equivalents.
Failure to identify the key features for clearance is a second common mistake. The search plan should be worked out between the attorney litigation team and the searcher(s). Communication should be iterative. Detailed attorney interaction with search team having deep contextual knowledgeable of the art space is critical to determine proper search scope. Are the key features older or well-known? Is a similar device used and a slightly different but related field? The answers to these questions affect which classes are searched, whether a full twenty-year time range is necessary, and inclusion criteria; i.e., whether any secondary features must be cleared.
A manual review of all documents in the relevant subclasses is necessary, otherwise patents with broad claims reading on the target elements will be missed. Although details are important, sending irrelevant references to the reviewing attorney (who is largely obligated to review all results forwarded by the search firm) requires unnecessary attorney time for review and is costly for their client.
Finally, the search must be well-documented. To be verifiable, the search must be reproducible. Documentation and reproducibility increase the client’s confidence level in the search, leading to more informed product development decisions.
Failure to all of the relevant jurisdictions in the search plan is an additional mistake. Overlooking the country of manufacture is frequent. To optimize efficiency, however, the search must be limited to jurisdictions where the product will be commercially active, whether manufactured or sold. Coverage of secondary international markets can be more efficiently performed after an initial search of patents and pending applications in the key markets, along with non-expired PCT applications.
Failure to supplement class searching with an assignee portfolio search of top competitors within the relevant technology space both risks missing blocking claims and deprives you of knowing what your competitors are up to. Limiting the search to known competitors and other key assignees risks that new entrants or other entities that may have broad claims or open patent families will be overlooked.
Note, however, that assignee searching supplements the manual class search. Limiting the search to known competitors and other key assignees risks that new entrants, stealth patents filed by competitors under different names, or other entities having broad claims or open patent families will be overlooked.
“So in war, the way is to avoid what is strong, and strike at what is weak.”
Sun Tzu, The Art of War
We found a problem patent. How do we deal with this? You determine whether issued claims that potentially read on your product are weak or strong. Doing so requires a comprehensive knowledge of the relevant art space at the time of the claimed invention. Because the stakes are high, a high degree of confidence is needed. Such confidence arises from the results of a diligent prior art search performed by an experienced search team.
Conduct a comprehensive search for prior art references that anticipate or render obvious the problem claims. The follow-up search for invalidating prior art will be informed by the new-found insights gleaned from your diligent FTO search. Carefully examine the patent prosecution history.
Given the state of the art and whether the patent examiner knew of the closest references, you may conclude that that the claims are valid. Avoid what is strong. If possible, design around blocking claim elements. Consider contacting the patent holder to explore possible opportunities for licensing or acquisition, depending on your funding, target markets, and other business considerations.
Conversely, you may determine the claims should never have been issued under 35 U.S.C. §§112, 102, or 103. You may be able to move forward and launch your product on the market. Before doing so, however, you should immediately and proactively obtain a formal legal written opinion of non-infringement. This accomplishes two important things in virtually any situation whereunder you are threatened with an infringement action: (1) it forces tpatent holder to strongly question whether its patent claim(s) will survive the invalidity defense you are guaranteed to raise in an infringement lawsuit; and (2) an opinion of non-infringement prepared by an experienced patent attorney is a powerful shield against a determination of willful infringement and consequential exposure to an enhanced damages award.
What about weak claims? Strike at what is weak. If the results uncovered by your prior art search create a substantial new question of patentability, file an ex-parte reexam. Was the problem patent issued less than one year ago? Consider filing a post-grant review. Are the problem claims still under examination or is the problem patent in an open family? If so, you can argue that your newly found prior art renders the claims not patentable in a third-party submission.
In conclusion, a diligent FTO search provides you with extensive insight necessary to manage risk while maximizing opportunities by gleaning informed insight of your competition. The diligent FTO search must be executed by a search team having deep knowledge of existing IP within the relevant space, and the technical context wherein this IP is practiced. Iterative communication between your patent attorneys and the search team ensures that the search of the proper scope–not too broad but not too narrow–allows for optimal resource utilization and is performed in light of your product development goals.
For questions, the authors may be reached at:
Steven J. Miller, M.D., J.D. Senior Advisor, Global Prior Art, Inc.
Lydia Bakalova, M.S Medical Device Group Leader, Global Prior Art, Inc.
Bruce Rubinger, Ph. D. Director, Global Prior Art, Inc.
1. Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S Ct. 1923, 1932 (2016).
2. Roche Diagnostics Corporation v. Meso Scale Diagnostics, LLC, 503 F. Supp.3d 156 at 172 (D. Del., 2020) (quoting Halo).